You did a great job advising your clients on Social Security.

You evaluated different filing options, integrated these into their comprehensive retirement income plan and provided concise recommendations. You may even have given them a nice 10 page report outlining all the details.

Think you’re done? Think again.

Although advising on Social Security planning is a strong value-add for an adviser, an equally important service may be coaching and guiding clients through the actual application process. There is nothing worse than having delivered solid planning advice to your client only to see implementation get waylaid at the Social Security Administration.

AFTER CLIENTS LEAVE THE OFFICE…
If your clients are filing for anything other than a straightforward Social Security claim on their own work record, there are pitfalls they may encounter after they leave your office with their report. This is especially so if they are filing for restricted benefits, survivor benefits only or family benefits.

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Take the case of Dave Reid and Terry Schuller.

Dave and Terry are married. They are both 66 years old and still working. Dave is the higher wage earner.

A thorough evaluation of their filing options indicated that the best strategy was for Terry to immediately file for benefits based on her work history. Dave would concurrently file an application restricted to spousal benefits only based on Terry’s work history.

(Getty Images)
An adviser's best laid plans may go awry when clients file with Social Security.
(Getty Images)

RESTRICTED FILING OPTION
Since they were both born before Jan 1, 1954 the restricted filing option was still available to them. It is being phased out for younger applicants born after that date as directed by the Bipartisan Budget Act of 2015.

The restricted option allows one spouse of a couple (Dave in this case) to file for Social Security benefits ‘restricted’ to spousal benefits only once he reached his full retirement age of 66.

Since he was not filing for benefits based on his own work history, Dave’s Social Security benefit based on his work history would continue to accrue valuable delayed retirement credits of 8% for each year he delays until age 70.

This powerful strategy projected both higher lifetime benefits for them as a couple and very importantly, maximized the benefit that the survivor would receive when the first person passed away.

THEORY MEETS REALITY
Although the strategy was sound, the application process with the Social Security Administration (SSA) was anything but.

Dave applied using the relatively straightforward on-line process at SSA.gov which can be filled out in about 15 minutes. Unfortunately it was the very structured format of the on-line process that was the cause of Dave's troubles.

There is no built-in option for a restricted filing. One is prompted to enter spousal information but that is all. There are no options for any filings which are integrated with the spouse's benefits. Dave checked a box which he thought meant filing for restricted benefits. It didn't.

Before Dave knew it he was notified that he was receiving all of his benefits including benefits based on his own work history. This meant forgoing the 8% annual (approximately 28% total since he was already 66 and a half) benefit growth which could have been accrued by waiting till age 70 to file for his own benefits.

NIGHTMARE SCENARIO
Reaching out to the SSA to remedy the mistake only led to a cascade of confusion and trouble.

There was a sequence of communications starting with a typically long phone hold and a conversation to start the change process. There was then a required in-person interview and additional paperwork to fill out — only to be later told that the staff member had him fill out the wrong form. Dave needed to come back in for another in-person interview and fill out the proper form.

But there was more.

Unknown to Dave, halting his original application automatically cancelled his earlier Medicare filing. He didn’t realize this until his medical insurance company (Dave was still working and had insurance through his company) informed him that they were dropping his coverage since coverage for a person who was over 65 required Medicare as the primary coverage.

A real mess and huge headache.

WHAT YOU CAN DO
This worst case Social Security scenario can be avoided.

If a client is filing anything other than a straightforward benefit based on their own work record consider these steps:

  • Do not let a client to file for benefits on their own.

Stay involved even if it is only checking in with them throughout the process.

  • Be prepared to provide your client with policy back-up.

The intricacies of the program are confusing and intimidating. This is why they hired you. Clients are easily be misled by well-intentioned but uninformed SSA staff assistance.

  • Review any SSA correspondence closely.

Specifically, the SSA sends out a confirmation letter after they receive the initial application. Make sure your client and you look this over closely to ensure it accurately reflects your client’s filing preferences.

  • Watch out for any Medicare conflicts.

Familiarize yourself with basic Medicare rules especially for clients who are 65 or older and still working.

  • Remain vigilant.

Not only will your client have a better experience but they will probably be impressed and thankful for your continued diligence and attention to their affairs.

Paul Norr

Paul Norr

Paul Norr is a certified financial planner with Bucks County Financial Planning Group in Thousand Oaks, Calif.